Back to GetFilings.com

Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Fiscal Quarter Ended January 31, 2004

Commission File Number 0-12788

CASEY’S GENERAL STORES, INC.

(Exact name of registrant as specified in its charter)

ONE CONVENIENCE BOULEVARD, ANKENY, IOWA

(Address of principal executive offices)

50021

(Zip Code)

(515) 965-6100

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)    YES  x    NO  ¨

As of March 4, 2004, the registrant had outstanding 49,992,362 shares of Common Stock, no par value.

Table of Contents

CASEY’S GENERAL STORES, INC.

INDEX

- 2 -

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in Thousands)

See notes to unaudited consolidated condensed financial statements.

- 3 -

Table of Contents

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Continued)

(Dollars in Thousands)

See notes to unaudited consolidated condensed financial statements.

- 4 -

Table of Contents

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

(Dollars in Thousands, except per share amounts)

See notes to unaudited consolidated condensed financial statements.

- 5 -

Table of Contents

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Thousands)

- 6 -

Table of Contents

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Continued)

(Dollars in Thousands)

See notes to unaudited consolidated condensed financial statements.

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

See notes to unaudited consolidated condensed financial statements.

- 7 -

Table of Contents

CASEY’S GENERAL STORES, INC. AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONSOLIDATED CONDENSED

FINANCIAL STATEMENTS

(Dollars in Thousands)

- 8 -

Table of Contents

Due to the change in accounting principle, inventory previously reported as of April 30, 2003 increased $2,250. The balance of retained earnings and taxes payable has also increased by $1,422 and $828, respectively, to reflect retroactive application of this new accounting method. Also, as a result of this change, the effect on the net income previously reported for the three months ended and the nine months ended January 31, 2003 is presented in the following table.

- 9 -

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in Thousands).

Overview

Casey’s General Stores, Inc. (“Casey’s”) and its wholly-owned subsidiaries (Casey’s, together with its subsidiaries, are referred to herein as the “Company”), operate convenience stores under the name “Casey’s General Store” in nine Midwestern states, primarily Iowa, Missouri and Illinois. All stores offer gasoline for sale on a self-serve basis and carry a broad selection of food (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco products, health and beauty aids, automotive products and other non-food items. On January 31, 2004, there were a total of 1,359 Casey’s General Stores in operation, of which 1,314 were owned by the Company and 45 stores were operated by franchisees. A typical store is generally not profitable for its first year of operation due to start-up costs and will usually attain representative levels of sales and profits during its third year of operation.

The Company derives its revenue from the retail sale of gasoline and the products offered in Company stores, and from the wholesale sale of certain grocery and general merchandise items and gasoline to franchised stores. The Company also generates a small amount of its revenues from the Company’s franchisees.

Approximately 62% of all Casey’s General Stores are located in areas with populations of fewer than 5,000 persons, while approximately 11% of all stores are located in communities with populations exceeding 20,000 persons. The Company operates a central warehouse, the Casey’s Distribution Center, adjacent to its Corporate Headquarters facility in Ankeny, Iowa, through which it supplies grocery and general merchandise items to Company and franchised stores.

- 10 -

Table of Contents

Total gross profit was down 3.3% to $95.7 million for the quarter and up 3.4% to $327.1 million year to date. Gross profit was adversely affected by third quarter gas and cigarette margins. Rising gasoline costs and poor winter weather contributed to the gas margins, and cigarette sales and tobacco margins were impacted by changes in manufacturers’ wholesale programs and retail display allowances, as well as a continued shift to lower-price brands.

During the quarter the Company completed a comprehensive tax review resulting in an adjustment to income tax expense. The Company’s effective rate on a year to date basis is expected to be lowered to 35.6% from 36.5% in the prior quarter and 37.2% for the nine months ended January 31, 2003. The provision for the three months ended January 31, 2004 includes a favorable adjustment of approximately $400 due to the year to date effective rate change and one time tax benefits of approximately $2,500. Included in the one time benefit are approximately $200 of tax legislative changes, $1,100 adjusting prior estimated federal and state credits to actual, $500 of available credits and state tax benefits previously not taken, and $700 due to the resolution of tax exposure items.

Three Months Ended January 31, 2004 Compared to Three Months Ended January 31, 2003 (Dollars and Amounts in Thousands)

Net sales for the third quarter of fiscal 2004 increased by $33,002 (6.4%) over the comparable period in fiscal 2003. Retail gasoline sales increased by $32,160 (10.3%) as the number of gallons sold increased by 8,627 (3.7%) while the average retail price per gallon increased 6.4%. During this same period, retail sales of grocery and general merchandise increased by $6,060 (3.2%) due to the addition of 39 new Company Stores during the current year and a greater number of stores in operation for at least three years.

Cost of goods sold as a percentage of net sales was 82.4% for the third quarter of fiscal 2004, compared to 80.7% for the comparable period in the prior year. The gross profit margins on retail gasoline sales decreased (to 6.4%) during the third quarter of fiscal 2004 from the third quarter of the prior year (8.9%) due to the gross profit margin per gallon decreasing (to $.0906) from the comparable period in the prior year ($.1187). The gross profits on retail sales of grocery and general merchandise increased (to 37.4%) from the comparable period in the prior year (36.9%), primarily due to the increase in sales and margins on specialty merchandise and new age drinks.

Operating expenses as a percentage of net sales were 13.9% for the third quarter of fiscal 2004 compared to 14% for the comparable period in the prior year. The decrease in operating expenses as a percentage of net sales was caused primarily by a increase in the average retail price per gallon of gasoline sold. Operating expenses increased 5.8% in

- 11 -

Table of Contents

the third quarter of 2004 from the comparable period in the prior year, primarily due to higher insurance costs, increased bank fees resulting from customers’ greater use of credit cards, and the larger number of corporate stores.

Income tax expense decreased $5,820 (124.2%). The decrease is primarily due to a reduction of pretax income, as well as a favorable adjustment of approximately $400 due to the year to date effective rate change and one time tax benefits of approximately $2,500 described in the overview section.

Net income decreased by $2,068 (26.1%). The decrease in net income was attributable primarily to the decrease in the gross profit margins on retail gasoline sales. Net income declined less than pretax income due to the offset by the income tax benefit recorded during the quarter.

Nine Months Ended January 31, 2004 Compared to Nine Months Ended January 31, 2003 (Dollars and Amounts in Thousands)

Net sales for the first nine months of fiscal 2004 increased by $154,341 (9.6%) over the comparable period in fiscal 2003. Retail gasoline sales increased by $144,266 (15.2%) as the number of gallons sold increased by 44,670 (6.3%) while the average retail price per gallon increased 8.4%. During this same period, retail sales of grocery and general merchandise increased by $23,207 (3.7%) due to the addition of 39 new Company stores and a greater number of stores in operation for at least three years.

Cost of goods sold as a percentage of net sales was 81.5% for the first nine months of fiscal 2004 compared to 80.4% for the comparable period in the prior year. This result occurred because the gross profit margins on retail gasoline sales decreased (to 7.1%) during the first nine months of fiscal 2004 from the comparable period in the prior year (8.3%) due to the gross profit margin per gallon decreasing (to $.1029) from the comparable period in the prior year ($.1115). The gross profits on retail sales of grocery and general merchandise increased (to 37.9%) from the comparable period in the prior year (37.3%), primarily due to the increase in the prepared foods margin (to 61.3%) from the comparable period in the prior year (59.8%).

Operating expenses as a percentage of net sales were 13.1% for the first nine months of fiscal 2004 compared to 13.6% for the comparable period in the prior year. The decrease in operating expenses as a percentage of net sales was caused primarily by a increase in the average retail price per gallon of gasoline sold. Operating expenses increased 5.5% in the first nine months of 2004 from the comparable period in the prior year, primarily due to higher insurance costs, increased bank fees resulting from customers’ greater use of credit cards, and the larger number of corporate stores.

- 12 -

Table of Contents

Income tax expense decreased $4,411 (21.7%). The decrease is primarily due to a favorable adjustment of approximately $400 due to the year to date effective rate change and one time tax benefits of approximately $2,500.

Net income increased by $1,187 (3.5%). The slight increase in net income was attributable primarily to the increase in the gross profit margins on retail sales of grocery and general merchandise and the decrease in income tax expense. However, most of this increase was offset by the decrease in the gross profit margins on retail gasoline sales.

Critical Accounting Policies

Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective judgments, often because of the need to estimate the effects of inherently uncertain factors.

Inventory. Inventories are stated at the lower of cost or market. Gasoline inventories are valued using the first-in, first-out (FIFO) method